These are the Slides for MA (Final year) Students of the Department of Social Work, University of Peshawar. Course Title: Social Institutions and Social System of Pakistani Society Dr. Imran Ahmad Sajid

1. Social Institutions :
Economy
IMRAN AHMAD SAJID, PhD

2. Iqbal Chaudhry
• An economic institution is the set of norms
related to production and distribution of
goods and services.

3. Economy
John J. Macionis, p.370
• The economy is the social institution that
organizes a society’s production, distribution,
and consumption of goods and services.

4. • Goods are commodities
ranging from necessities
(food, clothing, shelter)
to luxury items (cars,
swimming pools,
yachts).
Goods
• Services are activities
that benefit others (e.g.
the work of priests,
physicians, teachers,
and computer software
specialists).
Services

5. • We value goods and services because they ensure
survival or because they make life easier or more
interesting.
• Also, what people produce as workers and what
they buy as consumers are important parts of
social identity, as when we say, “He is a cobbler,”
or “she drives a Mercedes.”
• How goods and services are distributed, also
shapes the lives of everyone by giving more
resources to some and fewer to others.

6. Historical Overview
• The economies of modern nations are the
result of centuries of social change.
• Three technological revolutions organized
production and transformed social life.
1. Agricultural Revolution
2. Industrial Revolution
3. Information Revolution

7. 1. Agricultural Revolution
• The earliest human societies were made up of hunters and
gatherers living of the land. In these technologically simple
societies, there was no distinct economy. Rather, production and
consuming were part of family life.
• When people harnessed animals to plows, beginning some 5,000
years ago, a new agricultural economy was created that was fifty
times more productive than hunting and gathering.
• The resulting surplus meant that not everyone had to produce food,
so many took on specialized work: making tools, raising animals, or
building dwellings.
• Soon towns sprang up, linked by networks of traders dealing in
food, animals, and other goods. These four factors—agricultural
technology, job specialization, permanent settlements, and
trade—made the economy a distinct social institutions.

8. 2. Industrial Revolution
• By the mid 18th century, a 2nd technological revolution
was under way, first in England and then in North
America. The development of industry was even more
powerful than the rise of agriculture in bringing change
to the economy. Industrialization changed the
economy in 5 fundamental ways:
1. New Source of Energy
2. Centralization of Work in Factories
3. Manufacturing and Mass Production
4. Specialization
5. Wage Labour

9. 1. New source of energy: throughout history, “energy”
had meant the muscle power of people or animals.
But in 1765, the English inventor James Watt
introduced the steam engine. One hundred times
more powerful than animal muscles, early steam
engines soon drove heavy machinery.
2. Centralization of Work in Factories: steam-powered
machines soon moved work from homes to factories,
the centralized and impersonal workplaces that
housed the machines.

10. 3. Manufacturing and mass production: before the
industrial revolution, most people grew or gathered raw
materials such as grain, wood, or wool. In an industrial
economy, the focus shifts so that most people work to
turn raw materials into wide-range of finished products
such as processed foods, furniture, and clothing.
4. Specialization: centuries ago, people worked at home,
making products from start to finish. In the factory, a
worker repeats a single task over and over , making only a
small contribution to the finished product.
5. Wage labour: instead of working for themselves, factory
workers became wage labourers working for strangers,
who often cared less for them than for the machines they
operated.

11. Specialization

12. 3. Information Revolution*
• By about 1950, the nature of production was
changing once again. The US was creating a
postindustrial economy.
• Information revolution brought three
significant changes:
1. From tangible products to ideas
2. From mechanical skills to literacy skills
3. From factories to almost anywhere
*period characterized by widespread electronic access to information through the use of
computer technology.

13. 1. From tangible products to ideas:
• the industrial era was defined by the production of goods; in postindustrial
era, people work with symbols. Computer programmers, writers, financial
analysts, advertising executives, architects, editors, and all sorts of
consultants make up more of the labour force in the information age.
2. From mechanical skills to literacy skills:
• the industrial revolution required mechanical skills, but the information
revolution requires literacy skills: speaking and writing well and, of course,
knowing how to use a computer. People able to communicate effectively are
likely to do well; people without these skills face fewer opportunities.
3. From factories to almost anywhere:
• industrial technology drew workers into factories located newer power
sources, but computer technology allows people to work almost anywhere.
• Laptop and wireless computers and cell phones now turn the home, a car, or
even an airplane into a “virtual office.”.
• What this means for everyday life is that new information technology blurs
the lines between our lives at work and at home.

14. Sectors of the Economy
• Economy has three sectors
1. Primary Sector
2. Secondary Sector
3. Tertiary Sector
Economy Secondary
Primary
Tertiary

15. 1. Primary Sector
• Primary sector is the part of the
economy that draws raw materials
from the natural environment. It
includes:
– Agriculture,
– Raising Animals,
– Fishing,
– Forestry and mining.
• The primary sector is largest in low-
income nations.
• Primary sector constitutes economic
output;
– 26% low-income nations
– 10% middle-income nations
– 2% high-income nations
Pakistan:
Agriculture accounts for
20.88 percent of GDP and
43.5 percent of employment.

16. 2. Secondary Sector
• The secondary sector is the
part of the economy that
transforms raw materials into
manufactured goods.
• It includes operation such as
– refining petroleum into gasoline and
– turning metals into tools and
automobiles
– turning wood into furniture
Pakistan:
Manufacturing sector accounts 13.3 percent
of GDP and 14.2 percent of total employed
labor force.

17. 3. Tertiary Sector
• The tertiary sector is the part
of the economy that involves
services rather than goods.
• The tertiary sector grows with
industrialization, accounting
for
– 49% of economic output in low-
income countries,
– 55% in middle-income countries, and
– 73% in high-income nations.
Pakistan:
Services contributed 58.82 percent in 2014-15 to GDP

18. Agriculture Sector
• 1. crops,
• 2. livestock,
• 3. fisheries
• 4. forestry
Manufacturing sector
• 1. Large Scale
Manufacturing (LSM)
• 2. Small Scale
Manufacturing,
• 3. Slaughtering
• Sub-Sectors
• Wood Product,
Engineering Products,
Paper and Board, Food
Beverage and Tobacco,
Rubber, Iron and Steel
Products, Automobiles,
Leather Products,
Electronics,
Pharmaceuticals,
Chemicals, Non
Metallic mineral, Coke
& Petroleum Products,
Fertilizers, and Textile
Services Sector
• 1. Transport,
• 2. Storage and
Communication;
• 3. Wholesale and
Retail Trade;
• 4. Finance and
Insurance;
• 5. Housing Services
(Ownership of
Dwellings);
• 6. General
Government Services
(Public Administration
and Defense); and
• Other Private Services
(Social Services)

19. Economic Systems
• Two general economic models are
– Capitalism and Socialism.
• No nation anywhere in the world has an
economy that is completely one or the other;
• capitalism and socialism represent two ends
of a continuum along which all real-world
economies can be located.
Capitalism
Socialism
Economic
Systems
Capitalism Socialism

20. A. Capitalism
• Capitalism is an economic system in which
natural resources and the means of producing
goods and services are privately owned.
• An ideal capitalist economy has three
distinctive features:
Capitalist
Economy
1. Private
Ownership of
Property
2. Pursuit of
Personal Profit
3. Competition
and consumer
choice

21. 1. Private Ownership of Property: In a capitalist
economy, individuals can own almost
anything.
• The more capitalist an economy is, the more
private ownership there is of wealth-
producing property, such as factories, real
estate, and natural resources.

22. 2. Pursuit of Personal Profit: A capitalist society
seeks to create profit and wealth.
• The profit motive is the reason people take new
jobs, open new businesses, or try to improve
products.
• Making money is considered the natural way of
economic life.
• Adam Smith (1723-1790) claimed that as
individuals pursue their self-interest, entire
society prospers.

23. 3. Competition and Consumer Choice: A purely
capitalist economy is a free-market system
with no government interference (sometimes
called a laissez-faire economy, from French
words meaning “Leave it alone”).
• Adam smith stated that a freely competitive
economy regulates itself by the “invisible
hand” of the law of supply and demand.

24. • Justice in capitalism system amounts to
freedom of the market place, where a person
can produce, invest, and buy according to
individual self-interest.
• US, typical example of capitalist state

25. B. Socialism
• Socialism is an economic system in which
natural resources and the means of producing
goods and services are collectively owned.
• In its ideal form, a socialist economy rejects
each of the three characteristics of capitalism.
Socialism favours three features:
Socialist
Economy
1. Collective
Ownership of
Property
2. Pursuit of
Collective Goals
3. Government
Control of the
Economy

26. 1. Collective ownership of property: A socialist
economy limits rights to private property,
especially property used to generate income.
• Government controls such property and
makes housing and other goods available to
all, not just to the people with the most
money.

27. 2. Pursuit of collective goals: the individualistic
pursuit of profit goes against the collective
orientation of socialism.
• What capitalism celebrates as the
“entrepreneurial spirit,” socialism condemns
as greed; individuals are expected to work for
the common good of all.

28. 3. Government Control of the economy:
socialism rejects capitalism’s laissez-faire
approach in favour of a centrally controlled
or command economy operated by the
government.
• Commercial advertising thus plays little role
in socialist economies.

29. • Justice in a socialist context means not
competing to gain wealth but meeting everyone’s
basic needs in a roughly equal manner.
• From a socialist point of view, the common
capitalist practice of giving workers as little in pay
and benefits as possible to boost company
earnings is unjust because it puts profits before
people.
• Former USSR, Cuba, PRC, North Korea are
examples of Socialist states

30. Socialism and Communism
• Communism is a hypothetical economic and
political system in which all members of a
society are socially equal.
• Socialism is an economic system in which
natural resources and the means of producing
goods and services are collectively owned.

31. Relative Advantages of Capitalism and
Socialism

32. 1. Economic Output
• In 1980s, the GDP per capita of Capitalist
countries—US, Canada, Western Europe– was
about $13,500.
• The comparable figure for the mostly socialist
former Soviet Union and nations of Eastern
Europe was about $5,000.
• This means that the capitalist countries
outproduced the socialist nations by a ratio of 2.7
to 1. A recent comparison of socialist North Korea
(per capita GDP of $I,OOO) and capitalist South
Korea ($18,000) provides an even sharper
contrast.

33. 2. Economic Equality
• The distribution of resources within a population
is another important measure of how well an
economic system works.
• Societies with mostly capitalist economies had an
income ratio of about 10 to 1 (in 1970s); the ratio
for socialist countries was about 5 to 1.
• In other words, capitalist economies support a
higher overall standard of living, but with
greater income inequality, Said another way,
socialist economies create more economic
equality but with a lower overall living standard.

34. 3. Personal Freedom
• No system has yet been able to offer both
political freedom and economic equality.
• In the capitalist United States, the political
system guarantees many personal freedoms,
but these freedoms are not worth as much to
a poor person as to a rich one.
• By contrast, China or Cuba has more economic
equality, but people cannot speak out or
travel freely within or outside of the country.

35. Thank You